ESG Risk Assessment and Integration of ESG Factors into Supplier Selection

The sustainable assessment standard is integrated into EGCO Group’s supplier selection and screening process to ensure their capabilities to provide raw materials and services that meet the company’s expectations. Suppliers are required to complete the self-assessment questionnaire (SAQ) covering various topics. Purchasing practices towards suppliers are continuously reviewed to ensure alignment with the Supplier Code of Conduct and to avoid potential conflicts with ESG requirements. EGCO Group reserves the right to review suppliers’ operations regarding environment, social, and governance (ESG) as deemed appropriate. Suppliers are excluded from contracting if they cannot achieve minimum ESG requirements within a set timeframe. EGCO Group also reserves the right to exclude the supplier that fails to meet EGCO Group’s ESG requirements in the subsequent selection process

Quality of products and services, innovation management

Good corporate governance, data leakage prevention, law compliancy

Environmental management system, environmental projects, and the prevention of violation of environmental regulations

Social issues, include compliance with labor regulations and human rights, equal treatment, and human resources development

Occupational health and safety management system, accident prevention, and data reporting

Supplier Analysis

Unique significant suppliers are identified as critical and high-risk suppliers. Significant supplier analysis is carried out with the consideration of the following elements. Criteria to identify critical suppliers are as follows:

  • Active supplier during assessment.
  • Critical component/non-substitutable suppliers or similar and business relevant
  • High-volume suppliers (more than 80% of annual total procurement)

Criteria to identify high-risk suppliers involve expenditure and the outcomes of ESG risk assessment across key issues including economic factors, environment, safety, and reputation of the organization.

  • Economic risks e.g. quality and pricing of products and services, monopoly, and sustainable procurement.
  • Environmental risks e.g. water consumption and wastewater management, greenhouse gas emissions, energy consumption, impact on biodiversity, and air pollution.
  • Safety risks e.g. production process safety, accident rate, and emergency preparedness and response.
  • Reputation risks e.g. corruption, tax evasion, human rights, and employee treatment.

The suppliers categorized as critical suppliers and high-risk suppliers, with transaction volumes exceeding 5 million baht and gaining more than 50% assessment score are eligible to register as EGCO Group’s ‘Approved Vendor List’. Suppliers with a below 50% assessment score are required to develop a corrective action plan before becoming suppliers of EGCO Group.

Appendix F: Standard Clauses in TOR for High-volume Contract

Example of Supplier Screening and Risk Assessment

Country Business Sector Commodity Sustainability Issues
Country Level Sector Level Commodity-Specific Level - Electricity, Steam & Processed Water 
Thailand Renewable Wind Generate and supply electricity to its customer

Environment:

Energy Transition: Thailand is increasing renewable electricity capacity to reduce greenhouse gas emissions from the power sector.

Social:

Community Impacts from Energy Infrastructure: Energy infrastructure development may affect communities through land use changes or resettlement.

Governance/Economic:

Tariff and Trade Policy Risk for Renewable Equipment: Trade tariffs or geopolitical tensions may increase costs of importing wind turbines and components used in renewable projects.

Environment:

Biodiversity Impacts: Installation of wind turbines may affect birds and bats through collision risks and habitat disturbance.

Social:

Material Use for Turbine Manufacturing: Wind turbines require significant amounts of steel, copper, and rare earth elements.

Governance/Economic:

Community Acceptance of Wind Projects: Wind farm projects may face concerns regarding noise, visual impacts, and land use conflicts.

Wind Turbine Manufacturing Concentration: Global turbine manufacturing is concentrated among a very few suppliers.

Environment:

Land Use for Wind Farm Infrastructure: Wind turbine projects require changes to the original land use, as it needs space for foundations, access roads, and connection to the power grid.

End-of-Life Turbine Waste Management Wind turbine blades and components create waste management challenges at end of life.

Social:

Stakeholder Engagement and Grievance Mechanisms: Wind projects require engagement with local stakeholders and communities.

Governance/Economic:

Electricity Market and Energy Price Volatility: Volatility in the global energy market could impact investments in renewable energy and electricity rates.
Thailand Power Generate and supply electricity, steam, and processed water to its customers.

Environment:

Water stress areas: Parts of Thailand experience seasonal water stress that may affect industrial infrastructure and energy facilities.

Social:

Labour and contractor safety risks: Energy infrastructure construction and operation involve safety risks for workers and contractors.

Governance/Economic:

Political and Geopolitical Energy Risk: Global geopolitical tensions (e.g., Iran–US conflict affecting the Strait of Hormuz) can disrupt global energy markets and increase power generation costs in importing countries like Thailand.

Environment:

Air emissions from fossil fuel power plants: Power plants burning fossil fuels emit CO2 and air pollutants such as NOx and SO2.

Water consumption for cooling systems: Thermal power plants requires large volumes of water for cooling and steam generation.

Social:

Health impacts from air pollution: Emissions from fossil fuel power plants can affect air quality and public health.

Governance/Economic:

Fuel supply chain disruption risk: Natural gas supply disruptions or geopolitical conflicts can affect electricity generation.

Environment:

Lifecycle emissions from electricity generation: Fossil fuel power plants produce GHG emissions during combustion and upstream fuel supply.

Social:

Occupational safety in power plant operations: Workers face risks related to high-temperature equipment, pressure systems, and hazardous materials.

Governance/Economic:

Electricity price volatility and fuel costs: Electricity generation costs depend heavily on fuel prices such as natural gas.